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Endogenous Price Leadership and the Strategic Acquisition of Information

Author

Listed:
  • Scott M. Gilpatric

    (Department of Economics and Corporate Governance Center, 527C Stokely Management Center, University of Tennessee, Knoxville, TN 37996, USA)

  • Youping Li

    () (School of Business, East China University of Science and Technology, 130 Meilong Road, Shanghai 200237, China)

Abstract

We model a differentiated Bertrand duopoly in which a firm's earlier knowledge of market demand than its competitor results in endogenous price leadership with the information advantaged firm leading. In such a setting with second-mover advantage, we then study the firms’ incentives to acquire information and analyze an information acquisition game. Both (i) neither firm acquiring information and (ii) one firm acquiring information can arise as subgame perfect equilibrium, but both firms acquiring information is never an equilibrium outcome, even if information is free. Information may have a negative value if it causes a change in the timing of price competition.

Suggested Citation

  • Scott M. Gilpatric & Youping Li, 2016. "Endogenous Price Leadership and the Strategic Acquisition of Information," Southern Economic Journal, Southern Economic Association, vol. 82(3), pages 859-873, January.
  • Handle: RePEc:sej:ancoec:v:82:3:y:2016:p:859-873
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    File URL: http://dx.doi.org/10.1002/soej.12085
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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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